What risk management mistakes did Victor Niederhoffer make to blow up a few times?

[marketsurfer]

Prado, VN returned their capital many times over throughout the years instead of trying to manage something too big like the Fidelity Magellan Mutual Fund that had over $100 Billion during its height. How badly the Magellan performed is on record because of its size it moved big stocks when accumulating positions via FMRs 30 different Brokers and Clearing Houses. I know how FMR bought stocks under stealth methods, VN was wise enough to realize what his limits were and how much capital was right for him to manage. My friend learned he got tired trying to make 15%+ for a bunch of never happy rich people and dumped them all. He made more money today selling his Oil and Refinery stocks and does not have to share any gains with ungrateful people. I think VN should have only traded his money once he became wealthy, why have the headache?



Can you imagine trying to manage a Sovereign Wealth Fund, is that done by many Hedge Funds and a giant 300 employee entity? If everything I read about VN is truth(I believe he's a decent man, he payed by crappy Refco and got screwed by Refco and the CME(was exonerated in a civil settlement and paid those fund back to his former shareholders-fund holders)



There are people on several Elite Trader members who have declined to manage money for different many times, continually decline because they know how ungrateful people are and refuse to get health problems worrying over their money instead of those whose job it is to worry. I respect and admire Traders who make good money and refuse to manage money for a pack of hyenas or jackals, would you manage funds for people who call everyday asking "How's are fund doing today? Did you buy some Apple or MBLY, were you long the Refineries?" Do people attack Jesse Livermore as being the "Blow Up Artist" or is there some mythical essence that has every trader read all his old books? His books are timeless and so are Dr. Neiderhoffer, I would love to take him to dinner and enjoy his time more than Warren Buffet any day!

Great post, Rabid... Thanks!

 

[marketsurfer]

Man you are the master of ducking questions and cherry picking. This other guy's post is spot on. You have very little consistency in what you say. You can bash one thing if it's coming out of someones camp you like, but basically trash the same thing if it comes out of another one's.

Not at all-- VN has a dozen plus world class money managers WHO HAVE NOT BLOWN UP--- who credit him with their success in the markets. That's all i need to know that he is the right guy to have for a mentor.

the facts speak for themselves despite his personal demons-- the guy knows his stuff better than any other living speculator.

surf

 

[RabidTrader]

Thank god he returned the capital or he would have blown that up as well. You make it seem like he was responsible ??? That's a hoot. Wise enough to know his limits ? You should be on The Comedy Channel with this stuff. The guy traded well beyond his limits with the leverage he used. He lost everything. You are basically saying he's a good guy for only blowing out X instead of 5X. He obviously couldn't even handle the amount he had.

I agree he should have just traded for himself. Then he wouldn't have burned so many friends/family.

I agree on people who don't want to trade OPM because investors can be a major pain in the ass calling up 3 times a day for updates or complaining why didn't the fund own CMG because it's up 18% one day......bitching about draw downs. Who needs it. I respect them as well.

The difference between people taking exception with VN versus Livermore is VN comes out and trashes other methods after he has failed in an epic way.....twice. The guy loses everything twice but tells others they have no clue. That's why people are give him shit. He's got a giant ego for really no reason.

Funny you mentioned CMG, every day I churn it and enjoy it like I love their food after another incredible blowout earnings($850 by year end with AZO?) To topic, your right and I can't dispute the fact there are limits we all have and if given enough rope we will hang ourselves unless we can control risk and keep our accounts with ample cash during draw-downs and they always come, one of the hedge funds I know decided to dump several clients because they kept calling him relentlessly and followed him or conveniently ran in to him at fancy dining places and soon the topic of which stocks to buy was followed by him running the hell out of there with his girl!

 

[marketsurfer]

Thank you Market-Surfer for doubling something I've been writing about since VN blew-up in 1998 on Yahoo's Message Boards. I bought his first book "The Education of a Speculator" and fell in love with VN and all his cool anecdotes about life, his father and swimming." I am a long distance swimmer, wannabee chess player and Squash and Tennis player(use to be a A rated tennis player, a once 2190 chess player who never made it to Master because I spent too much time obsessed with Markets.).


M-trader paid his respects to VN acknowledging very few of us could ever do what VN did over periods of time where the Economy was insane. In your views don't you think the Markets were more crazier, 25 years before 1997 or did his gains benefit from our wild Economy? Did V.N. slipped up? He was use to more wild and Markets and because of his genius allowed things to slip because he figured out how Markets work like Benjamin Graham did? I think that a few of the top traders on Elite and some who are still hanging out enjoying the game have been able to take $3k or $5k and turned it in to $250k to $2 million. I took one of my IRAs of $3000 when Online Broker's margin screwed up and gave me unlimited buying power(on a cash-account, remember T+3) and turned this IRA in one year from $3k over $200k+, was this stupid luck or skill? I took that same account down to $75k after ducking around with Stock Options by gambling with products I knew nothing about. How stupid was I for leaving trading what worked well in to wanting instant wealth gambling with stock-options?

Great post, thank you. VN read some material I wrote on here back in 2002-- invited me up to his house to chat about markets and into his think tank type group--- we have been friends ever since- and incredible positive things have occured to me thanks to this relationship------ he is one impressive character and has my deepest respect.

I think he has a difficult to control competitive streak that is his downfall-- but it is also his key to the success-- so not sure what to suggest. I have witnesed VN go at with out mutual friend psychologist Brett Steenbarg$r --- that was quite interesting!

Speaking of tennis, I have seen VN shut down player after player half his age in CT--- highly skilled on the courts


Makes me ill to see these strivers and strugglers rip on him when they really have no clue.

 

[sprstpd]

Makes me ill to see these strivers and strugglers rip on him when they really have no clue.

You have no clue who is profitable on these boards but you tell other people they suck and you constantly have a holier than thou attitude. You are delusional.

 

[marketsurfer]

You have no clue who is profitable on these boards but you tell other people they suck and you constantly have a holier than thou attitude. You are delusional.

I know for certain who is profitable and who is not-- among the posters I know personally.

Sure, I don't know everyone and certainly there are profitable traders on elite who I have no clue about--

HOWEVER, it is clear by some posters claims and posts that they ARE NOT profitable. They expose themselves quickly. surf

 

[sprstpd]

HOWEVER, it is clear by some posters claims and posts that they ARE NOT profitable. They expose themselves quickly. surf

Ah, so you have a sixth sense in determining who is profitable and who isn't? Or maybe a better explanation is that someone is full of themselves?

 

[marketsurfer]

Ah, so you have a sixth sense in determining who is profitable and who isn't? Or maybe a better explanation is that someone is full of themselves?

Not a sixth sense or anything like that. It's not only obvious to me but it is to anyone who has been in the game long enough. Their own words give them away... peace, surf

 

[EPrado]

Not at all-- VN has a dozen plus world class money managers WHO HAVE NOT BLOWN UP--- who credit him with their success in the markets. That's all i need to know that he is the right guy to have for a mentor.

the facts speak for themselves despite his personal demons-- the guy knows his stuff better than any other living speculator.

surf

Surf you have completely left the reservation. Greatest living speculator? Wow.....

 

[EPrado]

Funny you mentioned CMG, every day I churn it and enjoy it like I love their food after another incredible blowout earnings($850 by year end with AZO?) To topic, your right and I can't dispute the fact there are limits we all have and if given enough rope we will hang ourselves unless we can control risk and keep our accounts with ample cash during draw-downs and they always come, one of the hedge funds I know decided to dump several clients because they kept calling him relentlessly and followed him or conveniently ran in to him at fancy dining places and soon the topic of which stocks to buy was followed by him running the hell out of there with his girl!

Yeah...I'm a big fan of their food. Eat lunch there at least once a week. The stock is a monster. Why anyone would short it is beyond me......

I agree with you on the draw down thing. They always come. If one doesn't know how to manage risk it can.....and will turn into a disaster. Been through em. Will go through more. Learned yrs ago that proper risk management keeps you alive and moving forwards even during draw downs.

I got to know a pretty big fund guy. Was in Market Wizards. He used to tell me clients would call him all the time being colossal pains in the ass. Questioning every tick down in performance. He basically told them to either stop with the everyday bs or take your money elsewhere. They all stayed. You kind of have to be tough with clients if you have a good track record. Personally I traded at a few hedge funds/CTA's and never dealt with that end of the business. Probably good because my patience would run thin real quick.